International Business Chapter 1

Pros for Producers and Globalization

- Access to new markets - Access to lower cost and better production inputs - Economies of Scale - Lower risk by diversifying across markets

National Sovereignty

- All nations are sovereign entities, they have the right to govern themselves - They are the ultimate authority in their own country - They have the right to make their own choices

Cons for Workers and Globalization

- Competition from other workers - Difficult to keep improving changing skills - Reduces salaries - Unemployment - Greater Stress

Arguments against globalization undermining national sovereignty

- Countries can choose whether to enter or not - Countries can leave global treaties - Countries can violate global treaties

Pros for Workers and Globalzation

- Creates new jobs - Improves workers' skills - Creates impetus to learn new skills - Makes them valuable to a larger set of firms - Improves income

Global Institutions that help Globalization

- GATT - WTO - IMF - World Bank - UN

Cons for Producers and Globalization

- Greater competition - Difficult to improve production processes - Difficult to continually innovate - Difficult to engage in IB

Cons for the Environment and Globalization

- Greater production, more stress on the natural world - Raw materials depleted - Global warming - Oceans getting polluted and depleted - Less oversight

Pros for Governments and Globalization

- Job Creation - Higher value-creating economy - More government revenues - Greater political stability - Less ability to regulate and control competition

Cons for Government and Globalization

- Job loss - Retrenchment of an uncompetitive economy - Lower government revenues - Greater political instability - Less ability to regulate and control competition

The reasons globalization causes greater competition (3)

- Lower Prices - Higher quality - More Products

Pros for Consumers and Globalization

- Lower prices - Superior quality - More products to choose from - Customized products - Faster service

Arguments for globalization undermining national sovereignty

- Organization like WTO and IMF makes the rules - Even if don't agree, still must abide by rules - Once entered, very hard to turn back - Costly sanction for breaking rules

Globalization of production examples

- Produce different parts of the product or service in different countries - Search for lowest cost production site - Search for best skills for specific activities

Stakeholders in Globalization (5)

- Producers - Workers - Consumers - Governments - The Enviornment

Globalization of markets examples

- Sell product or service in many countries - Economies of scale - Higher revenue base

6 Factors leading to Globalization

1. Free movement of goods and services across national borders 2. Relative economic stability across the world 3. Relative political stability across the world 4. Communication Improvements 5. Technological improvements 6. Transportation improvements

The Multinational Enterprise (MNE)

A firm that engages in international investments

International Business

Any business activity that involves the transfer of resources, goods, services, knowledge, skills, or information across national boundaries

Operational nature examples include

Communication, coordination, motivation, differences in organization, principles and management philosophies

Group of 20

Comprises the finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank

Home Country

Country in which MNE is headquartered and is doing business, also the country from which IB activities are controlled

Environmental Dynamics include

Currency, inflation, interest rates, accounting practices, cultures, social customs, laws, and political stability

Cons for Consumers and Globalization

Don't know what is going into the product

Globalization is driven by

Economice imperatives

International Vs. Domestic Business is significantly different due to differences in

Environmental dynamics and operational nature

International Business Includes

Exports and Imports International Investments

This has made it easier to sell internationally

Falling barriers to cross border trade

Host Country

Foreign country in which the MNE is doing business, also the country in which international activity is conducted

The Uruguay Round

Further reduced trade barriers; extended GATT to cover services as well as manufactured goods; provided enhanced protection for patents, trademarks, and copyrights; and established the World Trade Organization to police the international trading system

Major source for clashes between societies

Globalization

2 Types of Globalization

Globalization of production and Globalization of markets

Globalization is the reason for

Greater Competition

International business is conducted by (4)

Individuals, companies, government and bodies, and international institutions

Globalization of Markets

Merging of historically distinct and separate national markets into one huge global marketplace

FDI is becoming (Foreign Direct Investments)

More Important aspect

Economies of scale

More produce = lower production cost

Is there a relationship between globalization and hapiness

No

2 types of International Investments

Passive and Active

Moore's Law

Predicts that the power of microprocessor technology doubles and its cost of production falls in half every 18 months

Globalization

Process of increasing interdependence and integration of national economies

Examples of Intangible Exports and Imports

Services and Licensing

Globalization of Production

Sourcing of goods and services from locations around the globe to take advantage of national advantages in the cost and quality of factors of production

2 types of Exports and Imports

Tangible and Intangible

Pros for the Environment and Globalization

Virtually nons

Does globalization undermine national sovereignty?

Yes and No